Business - Knowledge

While the upcoming cuts to Corporation Tax will help UK businesses, many are still looking for that elusive funding facility in order to stabilise and grow. Managing Director of Hilton-Baird Financial Solutions, Evette Orams, identifies options that could assist. She says...

"George Osborne may have been widely criticised for his admission in December’s Autumn Statement that the Government has failed to meet a range of targets, however it appears that the Chancellor is listening to business owners’ wishes.

A running theme throughout the annual Statement was his attempts to stimulate the economy by improving conditions for businesses. From various tax cuts – including the complete scrapping of January’s planned 3p rise in fuel duty – to the extension of the Small Business Rate relief scheme, Mr Osborne’s message was clear: businesses are integral to the economy’s recovery.

In October, Hilton-Baird Financial Solutions conducted its biannual SME Trends Index, a survey that questions business owners and finance directors from across the UK about their businesses’ performance, challenges and funding habits. Ahead of the Autumn Statement, it asked respondents for the single most important action the Government could take to help their business to grow, and found tax cuts were highest on the majority’s agenda.

Reductions to VAT and Corporation Tax were top of the respondents’ wish-lists, representing 30% and 15% respectively, with a further 14% hoping for a cut in Income Tax. While VAT is set to remain at 20%, respondents will have been pleased to see that Corporation Tax will fall to just 21% in April 2014. Meanwhile, next year’s higher-than-expected increase to the basic Income Tax threshold is hoped to increase consumer spending.The funding gap

Another desire amongst respondents was the introduction of new Government funding initiatives, as cited by 16%. While there was an extension to the capital allowance tax relief and confirmation of the Government providing a further £1 billion for the Business Bank, no actual initiatives to tackle the immediate funding gap were announced. This shortfall is highlighted by Bank of England data, which shows that lending to private non-financial corporations in the form of overdrafts and bank loans decreased by 3.2% in the 12 months to the end of September 2012.

However, despite the lack of government support and reduced lending via ‘traditional’ funding methods, other types of business funding are still very much available. Figures from the Asset Based Finance Association (ABFA), the official body that represents the UK’s asset based finance industry, have once more highlighted the significant value this sector adds to businesses and therefore the UK economy. Between July and September 2012, the ABFA’s members advanced £16.5 billion to UK businesses. Not only is this the highest figure recorded since Q4 2008, it also represents a 3% increase on the corresponding period last year and provides a marked contrast to the traditional lending picture. The number of businesses using invoice finance increased by 4% over the same period to 43,429 – the highest figure since the end of 2009.

Asset based finance solutions excel at providing tailored cash flow support to businesses by releasing cash against a range of assets, primarily the debtor book, to help with day-to-day commitments, such as paying suppliers and facilitating orders.

This flexible funding enables businesses to stabilise in this turbulent economic climate, as evidenced in the ABFA statistics which show that clients’ sales reached £63.6 billion in Q3 2012, which represents an increase of 1% on the corresponding period the previous year.

The official statistics also demonstrate that asset based finance products, such as factoring and invoice discounting, are available to businesses of all sizes. Indeed, 49% of the ABFA’s members’ clients turn over less than £1 million, with 34% turning over between £1 million and £5 million. Larger businesses also benefit from asset based finance solutions, with 9% of the ABFA’s members’ clients turning over more than £10 million.

Holistic outlook

These figures go to show that, while traditional funding is not widely available at present, there are viable and, often, more suitable facilities available to businesses of all sizes.

Since its inception in the UK market in the early 1970s, the asset based finance industry has benefited thousands of businesses over the years and particularly throughout these more recent challenging times. With the economy’s future by no means certain, its flexibility and ability to release cash against the value of assets are key in times of both stagnation and growth.

What’s crucial is that businesses take the time to consider the full spectrum of lending options available to them. While traditional bank lending of course has its place, opening up to more flexible forms of funding can provide the support required to help achieve success."

About Evette Orams: Evette Orams is Managing Director of Hilton-Baird Financial Solutions, which is part of the Hilton-Baird Group of companies. As an independent commercial finance broker, Hilton-Baird’s aim is to clearly identify their clients’ business requirements and introduce them to relevant providers.

Hilton-Baird Financial Solutions was voted Asset Based Finance Broker of the Year 2009 & 2010 at the Business Moneyfacts Awards and UK Asset Based Finance Broker of the Year 2012 at the ACQ Global Awards, demonstrating its reputation and the trust its clients place in its service. he business’ affiliations to the leading financial industrial bodies, the Asset Based Finance Association (ABFA), the Finance and Leasing Association (FLA) and the National Association of Commercial Finance Brokers (NACFB), ensures it maintains the highest level of standards for its clients.